Prepare for low growth, Murray warns

Future Fund chairman
David Murray
warned yesterday that the developed world faced 20 years of low economic growth.

But he argued that the United States was in a much better position to recover from the economic doldrums than Europe, given that country’s high productivity levels.

The recovery in Europe, he suggested, would take longer, although he predicted that eventually Germany would be forced to fund a bailout of the euro zone because the cost of doing so would be less than the cost of a collapse of the common currency.

“The Germans are the only ones who can lead a bailout and it will be cheaper than the consequences of a fallout of Europe," said Mr Murray.

The head of the $75 billion fund was speaking at an Australian British Chamber of Commerce lunch in Sydney alongside opposition communications spokesman Malcolm Turnbull and
Hamish Douglass
of fund manager Magellan Financial.

Mr Turnbull said Australia should be saving more of the proceeds of the mining boom. If he were in government, he would run budget surpluses and establish a “proper" sovereign fund. “We need to be saving something for the future. We will get to the end of the boom and have nothing to show for it," Mr Turnbull said.

Mr Murray said Australia already had a sovereign wealth fund in the Future Fund.

He also cautioned against investing too much in infrastructure at this point in the economic cycle because projects would compete with the mining industry and lead to higher inflation.

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Mr Murray said one of the biggest lessons to emerge from the global financial crisis was that taxpayers could no longer afford to assume that governments would honour commitments to make pension or other social security payments.

Governments, he hinted, would pay the price for breaking those commitments.“When people realise that [the promises] are no longer sustainable, there will be severe political consequences," Mr Murray said.

The former Commonwealth Bank chief said consumers would need to become more financially literate to enable them to assess political promises, while governments would be required to exercise greater fiscal ­discipline and offer greater ­transparency.